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What I Learned About Natural Gas from Boone Pickens

Last week I interviewed the Texas energy baron T. Boone Pickens four consecutive nights in front of a live audience. Pickens would talk for 40 minutes and then I would interview him for 50 minutes. (Full disclosure: I was paid a fee to do this, not from Pickens but from the event’s owner.)

The Pickens presentations had an interesting underlying tension: Texas billionaire, oilman and Republican trying to convince earnest San Francisco Bay Area liberals about the virtues of natural gas. How did Pickens do in front of liberal, vaguely hostile audiences? Surprisingly well. He made his case with numbers.

Here is what Pickens said:

– Global demand for oil is 86-88 million barrels per day. It will be 90 million by the end of the year, due to global growth.

– Global production is 84 million barrels per day. Since production falls short of demand, prices have risen.

– America consumes 20 million barrels of oil per day. We produce 7 million barrels domestically and import the other 13 million barrels. Of the 13 million barrels of imported oil, 5 million come from OPEC – “nations that hate us,” says Pickens.

– The true cost of Middle Eastern oil is over $300 a barrel if you account for U.S. military presence in the Middle East, according to Pickens.

– “Drill baby, drill” – the conservative mantra to drill more oil from the Gulf of Mexico, off the East and West Coast shelves, and the Alaska Natural Wildlife Refuge (ANWR) would produce an extra 2 million barrels a day at best, says Pickens. The would raise America’s domestic production from 7 million to 9 million barrels but still leave America 11 million barrels short each day.

– In ANWR, the bottleneck is the pipeline from Alaska’s north shore. “It would take 30 years to build another pipeline,” says Pickens.

Hence the allure of natural gas: Pickens claims the U.S. has natural gas reserves equivalent to three times that of Saudi Arabia’s known 260 billion-barrel oil reserve when you use a Barrel of Oil Equivalent (BOE) comparison.

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We have to balance our books, and austerity measures coupled with an economy that can close the gap a bit with growth is the way to do it. Energy and energy policy is key. There has never been a sustained period of economic growth in the history of the world that has not been accompanied by an increase in energy consumption, and the strongest expansions have been fueled by lowered costs of energy. Encouraging things like this is no longer an option, its a necessity.

First, the childishly simple assumption that we wouldn’t spend anything on military operations in the middle east absent the oil reserves in that region seems to ignore reality.

How much oil has been found in Afghanistan, or Kosovo? . . . We’d have military operations in the middle east with or without a drop of oil there. Pickens and the others need to put away the tin-foil hats.

Pretending that our military budget counts as a subsidy to oil goes way beyond intellectual dishonesty. Pickens has an excuse because he’s trying to sell natural gas, others are just useful idiots parroting nonsense.

Next, I really wish that people would at least attempt to understand the fundamentals of truck operation before making grandiose comments about a topic in which they have no knowledge.

Electric Real world applications for electric propulsion of commercial trucks are limited short-distance delivery of lightweight products. Current battery costs are too high to make even heavily subsidized electric trucks practical.

Never mind the fact that the current electric grid is incapable of servicing existing air conditioning loads in a large metro area on a hot day, and it takes nothing more than a kid with a foil kite to knock out power to 20% of the country.

What will be the effect on today’s grid when the charging of 20,000 electric trucks gets added to existing demands?

Nat Gas The best-case scenario for using natural gas in trucks is in local and short-haul regional operations of less than 250 miles per day.

Here again, the extra cost of the natural gas option on a new truck is too high for most trucking operations to justify, even with the lower fuel costs and extensive direct subsidies for the vehicle hardware and fueling infrastructure.

Hybrids Even with the Bush-era tax credits for hybrid trucks, which Obama has failed to renew, the 10-year national average price of diesel fuel would need to be USD$4.41/gallon for an operator to break even on the added cost of the hybrid option.

Yes we’ll see diesel prices hit that level for a few months this summer, but sustained, decade-long average prices at that level are at least 5-6 years away, and by that time, other regulation-induced costs will likely have increased the break-even cost.

How About It RK? I could go on bursting fantasy bubbles for quite a while here, but I sure there’s a limit to comment size, and I doubt Rich Karlgaard is willing to share his byline and paycheck with me.

SO where are the numbers that show how many barrels converting 140,000 18-wheelers will save us at the small cost of $9BN? Maybe 0.5M barrels/day?? My math could be wrong but sounds like Boone used numbers for everything BUT his solution. I’m not sure his solution makes much of a dent in the problem unless of course you count the large dent it makes in his bank account.

I didn’t spell it out specifically in my post above, but true “18-wheelers” (long-haul, over the road, five-axle, 80K# tractor trailers), are the least likely to see any major conversion to nat gas, so the savings there will be a lot closer to 0.000 barrels/day.

Even with the best tank technology, there’s just too much of a weight and volume penalty for nat gas to be compatible with long-haul trucking.

Real emissions (not CO2) from diesel in new long-haul trucks have been virtually eliminated as of the 2010 model year, so there is no environmental or economic benefit for nat gas in this sector.

If natural gas engines are better, faster and cheaper than gasoline or diesel then people will demand them in the showrooms and the automobile companies will supply them at a premium. If the industry needs the same gentle goose to get itself going as semiconductors apparently did or they would not have come into the market (and that’s questionable) then the military should simply convert its own vehicles to natural gas…again if this is so much the better way for everyone to go.

Natural gas engines are exactly the same as gasoline or diesel engines—the only thing that needs to be modified is intake carburetors—to adjust to varying air/fuel ratios. We’ve been doing it for over 90 years.

Fiat and GM sell cars in South America that run on petroleum gasoline, gasoline and ethanol mixtures, pure hydrous ethanol, and/or natural gas. The Fiat Siena Tetrafuel is computerized and automatic. The driver simply fills up with whatever fuel is available and cheapest—the computer automatically adjusts fuel usage to match road conditions and preferentially uses the least expensive fuel first.

The Fiat Siena Tetrafuel can run just fine on petroleum, some petroleum, or no petroleum at all. And the MSRP for the Fiat Siena is about $19,000 compared to $24,000 for the Toyota Prius. The Prius can not run petroleum free.

Globally, the biofuels market reached $45 billion in 2009, and is estimated to grow to more than $100 billion by 2020. Today’s biofuels produced from conventional crops deliver an estimated 20-60 percent greenhouse gas emission reduction versus conventional fossil fuels such as gasoline and diesel. Expectations are that cellulosic biofuels will deliver at least an 80 percent reduction and reduce dependencies on fossil fuels – Jason Kim.

Measured at the tailpipe, biodiesel emissions are virtually identical to petrodiesel emissions.

The claims of 20%+ emission reduction are based on the fuzzy concept of carbon lifecycle calculations, which make congressional accounting look pretty sane in comparison.

Biodiesel blends above B5 cannot be used in cold weather.

Cellulosic ethanol has yet to escape from the laboratory into the real world; works fine at a tabletop scale, but the bulk involved in the feedstock logistics precludes scaling up to large-scale commercial use.

——” Measured at the tailpipe, biodiesel emissions are virtually identical to petrodiesel emissions.”—-

City buses here run on 20% biodiesel. When a city bus and and a diesel start up from a stop light side by side—a blind man could tell the difference—-not just from the cloud of black smoke coming from the petroleum diesel, but also by the smell.

——” The claims of 20%+ emission reduction are based on the fuzzy concept of carbon lifecycle calculations, which make congressional accounting look pretty sane in comparison”——-

It looks more like 200% or more to me—-just watching.

—-” Biodiesel blends above B5 cannot be used in cold weather.”—

I’ve seen the city buses running in some pretty cold weather. Scania, the Swedish heavy truck engine maker has been running a fleet of over 1,000 buses on ethanol ED95(igition enhanced pure ethanol) in Sweden and UK for many years now. Sweden is not exactly a tropical climate.

—–” Cellulosic ethanol has yet to escape from the laboratory into the real world; works fine at a tabletop scale, but the bulk involved in the feedstock logistics precludes scaling up to large-scale commercial use.”——

Germany ran everything from Panzer tanks and submarines to jet aircraft in the latter half of WW2 using synthetic fuel because the loss of North Africa and the allied bombing of Ploesti left them with virtually no petroleum at all. They produced synthetic fuel from coal and wood using the Fischer-Tropsch process. Wood was the preferred feedstock because wood does not contain sulphur that poisons the catalyst beds shutting the process down, and coal was needed for steel production. That was almost 70 years ago.

Actually, all we have to do is to look at a country where the “pump has been primed” for NG … Mexico. Filling up on NG (actually butanol) is as simple as pulling into a gas station. An attendant fills your tank in a matter of minutes.

But the 18-wheelers are still diesel? Why? Simple. Diesel is more efficient and has greater range between fill-ups. Greater range means fewer stops for fuel and time is money.

There are a lot short-range fruit trucks that are NG because they don’t need the range … but there are still a lot of fruit trucks that are diesel as well.

Boone is dead wrong on this one.

If we want to move to liquid fuel energy independence then the route is methanol (not ethanol). Methanol is already available at price that is cheaper than gasoline per BTU … without a subsidy.